how i paid off a $20,000 car loan in less than 2 years

Four months into my first full-time job, I made an incredibly stupid decision.

I purchased an expensive vehicle. And I took out a loan to do it. A $20,000 loan.

It is important to note that the $20,000 figure was a completely arbitrary number I chose at random because I thought it sounded like an adult-level dollar amount to pay for a car. I did not adjust this figure based on my annual salary or the amount of money I had tucked away in my savings account.

Now, before you think I’m completely financially inept, I will share a couple of things I did right: I bought used, so I didn’t have to swallow the depreciated cost of a brand-new vehicle. I negotiated a loan with a 3.5 percent interest rate, which is lower than average (although not as good as having that 3.5 percent still in my pocket, you know?).

I also went with a four-year loan vs. a six- or seven-year loan, which meant my monthly payments would be higher, but I would pay less in interest in the long run and also own my car quicker.

These were good places to start, but would have been completely unnecessary if I had played my cards right. The fact of the matter is that I walked out of that dealership with a pretty car and $20,000 of debt. You can buy a lot of stuff with $20,000. That is a lot of zeros.

Don’t get me wrong: I love my vehicle. I drive a lot to visit friends and family, and my car is reliable, comfortable, and has Bluetooth capability, which means I can rock out to the Moana soundtrack as I cruise through the McDonald’s drive-thru. But as wonderful as my car is, that $20,000 price tag was not something I wanted hanging over my head for four years.

Instead, I decided to shoot for the impossible: I wanted to own my car in half that time.

Before anyone sticks their nose in the air and tries to convince themselves that I must be some sort of superpowered magical wizard to make this fairy tale come true, I will start by saying that I do not make an exuberant amount of money. I am not bathing in Benjamins. I do not wallpaper my room with the faces of Andrew Jackson and Ulysses S. Grant. I make a modest (yet totally livable) income of less than 40k a year.

I did not have superhuman abilities that somehow made it easier for me to save money and pay off my debt. What I had was a vision, and the discipline to make that vision a reality.

Here’s how I paid off my car loan in less than two years:

1. I identified my spending priorities.

Once I secured a stable income and the paychecks started coming in, I had to decide what I wanted my dollars to do for me. At the time I took out my car loan, I was still making my final payments on my student loans. I also had to cover essentials like rent, groceries, and gasoline to get me to work.

But even with these obligations, I had dollars left over in my account, and it was up to me to decide how I wanted to spend them. Did I want to blow them on Starbucks frappuccinos and new clothes and concert tickets and artisan tacos, drowning in luxuries but still stressed about my bills and living paycheck to paycheck? Or did I want to max out my 401k, pad my savings account and make more than minimum payments on my loans?

The second option isn’t as glamorous on the surface, but it leads to financial independence—my true goal—whereas the first option leads to an expensive life that requires increasing amounts of effort, stress and income to maintain.

Once I established debt repayment and financial independence as my top priorities, I simply had to spend in alignment with those priorities. Which leads us to number two.

2. I started a budget.

I procrastinated on this one for a long time, because the thought of making a plan for my money sounded about as fun as a snugglefest with a Yeti. Budgeting was a trial-and-error process for me at first; I started with my own spreadsheet (which quickly failed because it was boring and inflexible) and then I moved to Mint (which is decent as far as free budgeting software goes, but doesn’t allow you to plan ahead for larger, one-time expenses like new tires or Christmas shopping—a serious pitfall).

Budgeting with YNAB was, and continues to be, one of the best decisions I’ve ever made, both for my finances and my quality of life as a whole. I would recommend it to anybody. Someday in the future I’ll write an entire post dedicated to how awesome it is, but for now, know this: According to YNAB’s website, new users save $300 on average their first month with the software, and $6,000 in the first year.

You know how there are mirrors on your vehicle so you can see into your blind spots? That’s what YNAB (and budgeting) does for your finances. It removes your ability to make excuses for your poor spending behavior, because the numbers are on the table and they say you went to Chipotle four times last week. (Unfortunately, this is a true story.)

WHY are you ordering chips and guac when you own a car you still haven’t paid for? PRI-OR-I-TIES.

3. I funded my priorities and threw out literally everything else.

Once I solidly rooted myself in my priorities, everything else became a luxury. As I became more financially aware, I realized “harmless” spending was not harmless at all. In actuality, it was something that came directly between me and my relentless quest for financial independence.

I will admit that this ruthless prioritization was not always fun. Sometimes it sucked. It sucked to watch my coworkers order mouthwatering craft burgers for lunch while I was eating a less-than-delicious salad I brought from home. It sucked to turn down happy hour because I knew ten-dollar, sugar-dusted martinis wouldn’t fit anywhere into my budget (or my waistline).

But my focus was never on these short-term pleasures, and the pain of saying no to them was fleeting. I was playing the long game, and financial independence was more important to me than literally anything else money could buy.

So I packed my lunch every day instead of joining my colleagues for lunch at a trendy downtown restaurant. I rented books from my local library for free instead of purchasing tickets to the movies. I swapped clothing with my friends in lieu of buying new. And I did this knowing that every dollar I saved brought me one step closer to unshackling myself from the burden of my debt, forever.

4. I aggressively started paying back my debt.

Once I had identified my priorities, set my budget, and trimmed the fat from my spending, I started throwing all my spare income toward my car loan. Earlier this year, I called my bank to increase the amount of my monthly payments—I had been watching my budget and knew I could fork over some extra cash while still having plenty of breathing room.

At some point, I realized there was an inverse relationship between my debt and my goal for financial independence; as the principle left on my loan shrank, my desire to have it paid off grew. I sold old junk on eBay for some extra cash and saved money on food by batch cooking. I delayed purchases until I truly needed them. I practiced gratitude and was thankful for all that I already owned.

And last week, it finally paid off.

I wrote my final check to the bank and paid my car loan off in full. After one year and nine months, this sweet blue baby is completely, totally, 100% mine.

Set your sights on your goals, whatever they are, and pursue them relentlessly. Don’t give up. The view is best from the top.

2 thoughts on “how i paid off a $20,000 car loan in less than 2 years”

I just loved reading your story- I especially appreciated the reference to a “snugglefest with a Yeti” as I own a Yeti and often wonder why I’m riding a mountain bike, period, and just about everywhere these days. Hats off to you for paying off your loan in such a short period of time! I just purchased a new-used vehicle and am excited to pay it off in a shorter period of time as well. I, too, am a YNAB dedicated user and it has truly changed my world, but I don’t ever feel like I have quite the success story as other YNAB’ers such as yourself. My biggest burden is my student loan and it feels impossible to pay it off in under 10 years. I think I’ll reconsider after reading your story. Thanks again for sharing.

Hi, Nicole, thanks so much for your kind words! Congrats on your new-used vehicle – hopefully my story can serve as a bit of inspiration. 😉
I understand where you’re coming from when you say you feel like you don’t have a “success story” compared to other YNAB users. I think it’s important to remember all of our situations are unique – we have different income levels, different spending habits, and different obligations. I’m lucky because I don’t have elderly or sick family who require my care, or children that I need to provide for. I think the fact that you budget and are cognizant of how you’re spending your money is more of a success story than you give yourself credit for!
Best of luck on your debt repayment journey – I hope you’ll keep me updated! 🙂

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Hi, I'm Amanda. I'm a twenty-something young professional who loves writing, organizing, and occasionally falling asleep at the wrong end of the bed. My cockatiel Jasper is my sole reason for existing.